Pay As You Go vs. Pay Monthly Mobile Phone Contracts

Contract or pay as you go?

Which is best, contract or pay as you go? It's an age-old argument, and one which ultimately comes down to personal preference. If you're agonising over which payment plan to choose, here's a brief overview of each type to help you reach a decision.

Pay as you go

Prepay or pay as you go deals are offered by most major providers, including Vodafone, O2 and Orange . The basic concept is that you buy your own handset and then pay in advance through a voucher or card for a set number of minutes and text messages.

The advantage to this type of plan is that you have far greater control over how much you spend every month. In the current financial climate, many people are unwilling to commit to long contracts that could end up being burdens in the event of pay cuts or redundancy. With pay as you go, you won't run up your mobile account without being aware of it. If money is tight, you simply have to use your phone less to save cash. This arrangement is great for people with irregular incomes or infrequent mobile phone users.

On the other hand, going down the pay as you go route has a number of disadvantages attached. Calls and texts often cost more than they would on a contract, and you will need to provide your own handset. This needn't be too much of a financial burden - Vodafone, for example, offer the Nokia 2610 from £14.65 on pay as you go - but if you're keen to have a cutting-edge phone then it's a big drawback. What's more, pay as you go customers will almost always pay more for extra services like mobile internet and GPS.

Pay monthly

Pay monthly contract plans are generally a more popular option among regular users of mobile phones. Under this arrangement you commit to pay a set rate every month for line rental, which will usually include a package of free minutes and text messages. If you use all of these up, additional minutes will cost extra.

There are several advantages to taking out a contract, primarily the cheap cost of calls as compared with pay as you go. Anybody using their mobile for more than around ten minutes per day will usually save money with a contract. Another advantage is that most companies will offer you a cheap or discounted handset with your contract, and you should be able to select from the most up to date phones. Vodafone, for example, offer sought-after handsets like the HTC Desire free with a monthly tariff, while you can pick up an Apple iPhone with certain o2 contracts. You may also find a pay monthly contract more convenient, since it's impossible to run out of available minutes.

On the other hand, those taking out a contract should bear in mind that they are agreeing to pay for a service for a certain amount of time. If you sign up for an 18 month contract then you can't change your mind and switch providers after a year - you are bound to that provider for the duration of the contract. It is therefore essential to think carefully before committing to paying a monthly tariff.